More firms to go bust in wake of Budget tax hikes

Britain faces a wave of insolvencies as businesses are hit by higher taxes and soaring costs alongside a prolonged period of elevated interest rates in the wake of the Budget.

In the latest blow to Rachel Reeves, corporate bankruptcy experts warned the number of firms going bust would rise this winter and through next year.

Gordon Thomson, of accountancy firm RSM UK, warned of ‘a wave of distress’ among business following the Chancellor’s national insurance hike and increase in the minimum wage.

John Cullen, insolvency partner at accountants Menzies, added: ‘It would be unrealistic to think that corporate insolvencies will go anywhere but up during the course of 2025.’

The CBI will today warn tax rises in the Budget will hit corporate profits – damaging the UK economy in the process.

CBI chief Rain Newton-Smith will say in a speech: ‘When you hit profits, you hit competitiveness, you hit investment, you hit growth.’

The Chancellor faces an ongoing backlash over her Budget – and in particular the £25billion increase in national insurance paid by employers.

Bank of England Governor Andrew Bailey has also warned interest rate cuts will have to be ‘gradual’, which will extend the period of elevated borrowing costs for businesses.

Insolvency experts are now warning of a wave of corporate failures as a result. Ric Traynor, boss of restructuring group Begbies Traynor, told the Mail many firms will ‘throw in the towel’ in the New Year rather than keep going only to be hit with a bumper tax rise in April.

Insolvencies hit a post-Covid peak of 2,293 in October 2023 but fell 24 per cent to 1,747 last month – crucially before the Budget.

But these figures are set to go into reverse as the Budget measures take effect.

David Hudson, restructuring advisory partner at FRP, said: ‘Changes to national insurance will only increase costs for those under-pressure businesses, which may well be a factor in further companies going under.’

Mark Ford, at wealth manager Evelyn Partners, warned many firms will be ‘fighting for their survival’ due to rising wage bills.

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